Brexit hits rebalance of FE Invest Approved list

UK equity funds have fallen off the FE Invest Approved list in its first rebalance following the Brexit vote, making room for North American growth funds to debut on the buy list.

The £26.4bn Standard Life Global Absolute Returns and £15.2bn M&G Optimal Income funds have also been bumped from the list, which is updated twice yearly.

FE Research says it anticipates volatility as the UK begins its exit from the European Union following the Brexit referendum.

Additions to the list in the North American space include Fidelity American Special Situations, Legg Mason ClearBridge US Large Cap Growth and T. Rowe Price US Large Cap Equity funds.

Rob Gleeson, head of FE Research, says: “We have had to greatly expand our US coverage. North America presents an attractive opportunity for British investors in this post-Brexit environment – especially if sterling remains weak against the US dollar.

“We also don’t see Trump as a threat – even if he wins the US elections this November, we imagine a lot of the actual policy decision-making will remain with the GOP old-hands. At the moment – we see President Trump as less of a threat than we do Brexit for UK investors.”

In the UK equity space, FE Research recommends selling a number of funds including: Liontrust Macro Equity Income, Neptune UK Mid Cap and SVM UK Growth, as well as Schroder’s UK Alpha Income and UK Smaller Companies.

However, it recommends buying the Franklin UK Managers’ Focus fund in the UK All Companies sector.

Gleeson adds: “While we are not concerned over the quality of UK equity funds currently in the FE Invest Approved list – we are certainly concerned over the asset class as a whole in light of the recent vote to Brexit.”